Why not? You could also auction being the registry for .com domains: if it's worth so much they will spend more money, which the ICANN can use to subsidised as needed.

As an example look at the auctions for the mobile phone frequency licences: that worked pretty well.

The same problem with evaluating the value of domains exists; no effective price signalling and temporal fluctuations in the value of a domain to any individual.

Moreover, by capturing much of the value of domains currently realised by the domain aftermarket, the registrars would remove much of the little amount of signalling in the market that currently exists.

It's like suggesting that dysfunction in the labour market would be reduced if wages were set by a really big organisation, like the government.

But I didn't say ICANN would set the prices, I said it would auction them. Not sure I understand how your point applies.